India Morning Note - Keynote Capitals (February-23-'11)

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Views on markets today

·      Indian markets closed a volatile session on lower note yesterday ahead of F&O expiry of February series following a sell-off across the globe, tracking sharp rise in crude oil prices since yesterday due to rising concerns in Libya. Crude oil rallied to 2.5-year highs on concerns the revolt in Libya could spread to other major oil producers in the Middle East and North Africa. However, Reliance Industries gained 5.5% after BP Plc agreed to buy 30% stake in 23 oil and gas blocks owned by Reliance. Except oil & gas and consumer durables, all sectoral indices closed lower with capital goods, auto, banks and metal stocks were major loser. Idea Cellular fell 4.8% after the report that the mobile operator may lose permit in six regions and face fine on the recommendation of a legal officer.

·      Market breadth was weak at ~0.66x as investors sold large cap stocks. FIIs sold equities worth `3.86bn while domestic institutions bought equities of `4.13bn.

·      Asian stock markets declined on Wednesday, weighed by sharp losses in the US markets overnight and the continued political turmoil in Libya. Japanese shares declined with the yen's recent strength hurting exporters' shares. The Hang Seng was negative ahead of finance secretary John Tsang's budget speech, with a spot of weakness in some local property developers on worries the government may announce measures to increase housing supply.

·      We expect a weak opening for the Indian markets as the global markets are uncertain regarding the Libya issues and the rising crude prices.

Key events today

·      Opening of the IPO of Fineotex Chemical Ltd. (price band `60-72 per share), closes February 25.

Economic and Corporate Developments

·      The government is likely to dilute a provision in an upcoming legislation on mining that would have required companies to share profits with local communities.

·      The country's food subsidy bill is expected to jump by 27% to `742.3bn in the FY11.